Offer price may lead Cedar Fair's shareholders to block sale

Many shareholders in the parent company of California’s Great America think they are being taken for a ride.

That could be a problem for Cedar Fair Entertainment Co.’s proposed $2.4 billion sale to an affiliate of private equity firm Apollo Management LP.

And that raises questions about how the sale will affect the park’s fight against plans to build a new home for the San Francisco 49ers next door.

Cedar Fair’s attorney Geoffrey Etnire said the sale was merely a change in ownership and if approved would have no immediate impact on a lawsuit Cedar Fair filed Dec. 9 aimed at halting the proposed stadium. That lawsuit, filed in Santa Clara County Superior Court, contends that Santa Clara officials and the 49ers organization violated state environmental law by approving a tentative agreement to build the stadium in June before the project’s final environmental impact report was completed.

Cedar Fair spokeswoman Stacey Frole doesn’t anticipate that a change in equity ownership will affect negotiations to build the stadium.

Apollo Management, which has close to $40 billion in assets under management, would not comment on the Cedar Fair transaction, the lawsuit or on its intentions for the park if the deal closes sometime in March or April.

Following the market’s close on Dec. 16, the Sandusky, Ohio-based owner of the Santa Clara theme park said it would sell the company to an Apollo affiliate for $11.50 per share, a 28 percent premium over Cedar Fair’s $9.08 closing price that day.

Cedar Fair stock has traded as low as $5.75 and as high as $14.10 in the past year. Disgruntled shareholders believe its true value in near the higher end of that range than Apollo has offered to pay.

Discontent with the deal Cedar Fair’s board entered into was apparent Dec. 17 when analysts used words such as “disappointing” to describe the price. Numerous law firms announced investigations into possible breach of fiduciary duty and other violations of Delaware state law by Cedar Fair’s board, which unanimously approved the deal.

“We are disappointed with the planned transaction, primarily on the basis of price,” said Jeffrey Thomison, an entertainment and leisure industry analyst at the investment firm J.J.B. Hilliard, W.L. Lyons LLC.

If the company remains public, Cedar Fair’s share price could potentially rise into the “upper teens” in 2011, Thomison said, based on rising cash flows and nearly $100 million a year in declining debt.

“We feel some unit holders are likely to be disappointed with the buyout price, so this approval is not a foregone conclusion in our view,” Thomison said.

Law firms have announced investigations into whether the price is “substantially below the fair or inherent value of the company,” according to one firm, and whether the board failed to adequately shop the company before entering into the transaction.

Four lawsuits have been filed in Erie County Common Pleas Court in Ohio on behalf of five Cedar Fair unit-holders, allege the offer price of $11.50 per each limited partnership unit undervalues the company’s worth, the Sandusky Register reported Dec. 23.